In the week ahead, investor focus should shift away from policy comment towards Eurozone data given the release of the German GDP breakdown and Eurozone flash CPI.
We say ‘should’ because it increasingly appears ECB President Mario Draghi has positioned himself to ‘take on the market’ in order to prevent any adverse market moves in either bond or currency markets.
However it remains to be seen just how much political capital the ECB President can expend without impacting his credibility with investors (and a supposedly unanimous Governing Council). It is for this reason we question whether latest comments can prevent and an end of year rise in EUR/USD.
Indeed with EUR/USD short positioning already heavily extend, we recommend readers to brace for a correction higher in the week ahead towards 1.2680.
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